Blumenthal Asks CFTC, Holder to Crack Down on Gas Price Manipulation

Urges "immediate and strong enforcement of the newly adopted position limit rule"

September 19, 2012

Richard Blumenthal

HARTFORD, Conn. -- U.S. Senator Richard Blumenthal (D-Conn.) called on the U.S. Commodity Futures Trading Commission (CFTC) and U.S. Attorney General Eric Holder to crack down on the improper speculation and manipulation of gasoline prices. In two different letters sent to the CFTC and Holder, Blumenthal asked for stringent and immediate enforcement of legal prohibitions that would help stop these abuses.

In his letter to the CFTC, Blumenthal asked the agency to enforce their newly adopted position limit rule--imposing limits on the size of speculative bets that can be made by investors on future prices of gasoline. Last May, Blumenthal and his colleagues called for the CFTC to adopt these position limits in order to prevent market participants from manipulating prices at the expense of American consumers.

"I am writing to urge immediate and strong enforcement of the newly adopted position limit rule to help stop increasingly rampant speculative trading reportedly driving recent rapid price increases in gasoline," Blumenthal wrote. "Speculators continue to artificially inflate the price of gas, and consumers continue to pay the price. The commission has done the necessary work to clearly establish legal authority to enforce position limits. It should use this authority now."

In his letter to Holder, Blumenthal asked the attorney general to use new and existing legal tools to stop these abuses--in particular the Oil & Gas Price Fraud Working Group.

"At a time when so many Americans are struggling, spikes in the prices of gasoline and other basic commodities are particularly harmful to American families. The harm caused by speculators in inflating gas prices is especially damaging. The price at the pump in Connecticut has risen to $4.15 and shows no sign of going back down," Blumenthal wrote. "More than a year ago, the Department established the Oil & Gas Price Fraud Working Group to combine and coordinate resources of several agencies against wrongful manipulation of energy markets. As I have stated in public hearings, I encourage you to use this tool as aggressively and effectively as possible. Speculators who make profits by artificially inflating the cost of a basic commodity should be identified and shut down."

Blumenthal's work on the improper speculation and manipulation of gasoline prices includes previous requests to the Department of Justice. On April 21, 2011, Holder announced the formation of an Oil & Gas Price Fraud Working Group to focus specifically on fraud in the energy sector by monitoring oil and gas markets for potential violations of criminal or civil laws. The purpose of the working group was to safeguard consumers against unlawful harm. At the time, Blumenthal sent a letter to Holder maintaining that "announcing such investigations and beginning to issue subpoenas could curb some of the worst speculative activity that may well be underway at this very moment." However, the working group was slow to release information about its investigations or conclusions. On March 18, 2012, Blumenthal sent another letter to Holder asking that he make use of the working group that had, at the time, been in existence for almost a year.

Click here to view the full text of Blumenthal's letter to the CFTC. And click here to view the full text of his letter to Holder.

In late August, U.S. Sen. Dianne Feinstein (D-Calif.) sent a letter to Jon Leibowitz, chairman of the Federal Trade Commission (FTC), calling for an investigation into recent spikes in the price of gasoline in California.

"The recent price spike began on August 6, when a refinery fire at Chevron's Richmond Refinery reduced refining capacity at the state's third largest refinery," Feinstein wrote. "However, this dangerous incident has not resulted in a reduction of gasoline supply that would explain the recent rapid price increase."

The letter continues: "Since August 6, gasoline prices have risen 30 cents per gallon, reaching $4.21. As a result, California has the highest gas prices in the continental United States. The increase is more than double the increase in the national average over the same period."

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